States Losing Billions In Refusing To Expand Medicaid

Texas will lose $9.2 billion in 2022; Florida says goodbye to $5 billion; Georgia is out $4.9 billion. A new report details just how much states are losing because they don’t want to expand Medicaid under Obamacare, and it’s not chump change.

Red states may be sticking to their Republican beliefs in small government, but the Commonwealth Fund finds they are passing up billions in federal funding by saying no to the Medicaid expansion.

“By choosing not to participate, Texas, for example, will forgo an estimated $9.58 billion in federal funding in 2022. Taking into account federal taxes paid by Texas resi­dents, the net cost to taxpayers in the state in 2022 will be more than $9.2 billion,” the report by Sherry Glied and Stephanie Ma of New York University says.

“We find that the Medicaid expansion will be a relatively large source of federal revenue to state enter­prises," the report adds. States expanding Medicaid will get, on average, more than twice as much in federal funding than they get in federal highway funds, they said.

It’s the latest report on what Medicaid expansion would mean on a fiscal level to states, and the timing couldn’t be better for the administration of President Barack Obama. The White House has launched a three-week drive to highlight what it says are the benefits of the 2010 Affordable Care Act, and Obama has been urging states to expand Medicaid.

The ACA was designed to transform health care in the United States, which most experts agree currently costs too much and leaves far too many people without health insurance. One way to do that is through the health insurance exchanges, where people can buy private insurance and which are dominating the headlines now.

The other way was by requiring states to extend Medicaid to people earning up to about 138 percent of the federal poverty level, or about $14,800 for single people and $31,000 for a family of four.

Medicaid is usually a cost-sharing program – the federal government pays on average about 57 percent of costs and states pay the rest. But under the expansion, the federal government will pay 100 percent of the additional costs for the first three years. States will have to kick in a very small percentage more each year after that. By 2020, the federal government will pay 90 percent of the costs.

But after a series of challenges to the law, the U.S. Supreme Court ruled in 2012 that the Medicaid expansion requirement went too far. States can’t be forced to add more people to Medicaid, the court ruled.

Many Republican-led states immediately said they would not be expanding Medicaid.

“As of November 2013, 20 states have decided to opt out of the Medicaid expansion,” the report said.

Glied and Ma calculated how much this would cost by 2022, and took into account states’ arguments about the so-called woodwork effect – the argument that people who were already eligible for Medicaid but had not applied would do so if they heard about the expansion. These people would still cost states the 43 percent or so of state contributions to Medicaid.

But they also calculated savings. States would not only get the direct federal money, but would save the money that taxpayers end up spending on so-called uncompensated care – when sick or injured uninsured people show up in emergency rooms seeking treatment.

Their calculations show that by 2022, Florida would lose more than $5 billion and Georgia would forgo $4.9 billion. They also looked at what Medicaid brings to states in comparison to two other giant federal programs – federal highway funds and defense funds.

The report projects that Alabama would bring in $2.1 billion in federal funds from expanding Medicaid; $975 million in federal highway funds and $10.4 billion in defense procurement contracts. North Carolina would get $5.7 billion in Medicaid money; $1.3 billion in federal highway funds and $4.6 billion in defense contracts.

Indiana, Montana, New Hampshire and Tennessee are undecided about the expansion. Indiana would bring in nearly $2.6 billion in Medicaid money in 2022; $1.2 billion in highway funds and nearly $5.6 billion in defense contracts.

The Urban Institute, Lewin Group and Rand Corp. have also issued reports showing states will lose billions by not expanding Medicaid.

The decision not to expand Medicaid has more than financial effects. It leaves a lot of people without any inexpensive options for health insurance, because the law assumed states would expand Medicaid and doesn’t provide insurance subsidies for the very poor.

“If adopted by all states, the Medicaid expansion is expected to provide health insurance to as many as 21.3 million Americans by 2022,” the report says.

“No state would experience a positive flow of funds by choosing to reject the Medicaid expansion. Because the federal share of the Medicaid expansion is so much greater than the state share, taxpayers in non-­participating states will nonetheless bear a significant share of the overall cost of the expansion through federal tax payments—and not enjoy any of the benefits,” the report concludes.

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